Consider a society with only two people, one with an income of $ 200,000 and one with an income of $ 20,000. Assume that under the current tax system, the rich person pays $ 50,000 in taxes and the poor person pays $ 1,000. Suppose Congress passes a law that cuts the rich person’s taxes by $ 2,000 and the poor person’s taxes by $ 200. Using Equations (14.1) and (14.2), assess whether this tax change increases or decreases progressivity.
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